Capital A Bhd (Capital A) reported headline net loss of RM884.0m for 4QFY21, almost similar to the loss of RM887.0m in the immediate preceding quarter. Stripping out one-off items, cumulative FY21 core net loss is estimated at RM2.82bn which is within our and consensus full year loss estimates. Losses incurred in FY21 are primarily due to revenue shortfall in aviation-based revenue as Covid-19 travel restrictions remained for most part of the year. Nevertheless, flight routes across its operating markets have resumed following the easing of travel restrictions. While demand is expected to improve with further reopening of international borders, we are wary over the Group’s PN17 status and challenges it may face in addressing the condition over the near to medium term. We cut our target price to RM0.69 (RM0.79 previously) as we lower valuation on the airline business to 4x FY23 EV/EBITDA, at the lower-end of regional peer comparison. While we see value in its non-airline business and there appearing to be attraction from the standpoint of a “border re-opening play”, we suggest investors wait for more clarity on the Group’s turnaround plans. We maintain our Neutral call meanwhile.
- 4QFY21 Group revenue doubled YoY to RM717.2m as travel restriction eased across the region, aided by steady growth in the digital businesses. Aviation segment and non-airline revenue grew 108% and 141% YoY and contributed 64% and 36% respectively to Group revenue. Domestic travel picked up substantially with the Group operating at 38% of pre-COVID domestic capacity amid limited international operations. Teleport revenue grew 274% YoY due to strategic growth of cargo network and better yields. Revenue for Airasia super app grew 51% YoY, driven by Travel vertical, airasia ride and breakage income. BigPay revenue increased by 29% YoY driven by growth across all product lines in tandem with increase in user base (YoY: +50%, QoQ: +15%). BigPay’s user base crossed 1 million users by end-4Q.
- Negative Group EBITDA narrowed 6% YoY but widened 30% QoQ to RM366.5m for 4QFY21. Despite higher revenue (YoY: +108%, QoQ: +292%), negative EBITDA for the aviation business widened by 119% QoQ due to steep increase in fuel costs (YoY: +173%, QoQ: +475%) and higher fixed costs resulting from flight resumption expenses. Maintenance costs jumped 15x YoY and 4x QoQ to RM286m due to consumables and c-checks to get aircrafts flying. Airasia super app reported a marginal positive EBITDA of RM8.9m in 4QFY21 compared to negative EBITDA of RM79m in the previous quarter due to breakage income of RM48m. Teleport posted smaller EBITDA of RM3.2m (YoY: -81.4%, QoQ: -127.7%) while BigPay’s negative EBITDA widened to RM46.6m (3QFY21: - RM32.9) due to investments in user acquisition, product development and market expansion in preparation for upcoming key launches.
- Outlook improves, PN17 status and high oil prices notwithstanding. We expect air travel recovery trends to continue in 2022, led by domestic air travel and to be followed by more meaningful recovery of international travel in 2H22. While the pace of air passenger traffic recovery remains uncertain, the Group has sufficient liquidity to ride out the ongoing negative effects of the pandemic and to ramp up its operations once borders fully re-open. The Group’s digital businesses (airasia superapp, Teleport and BigPay) continue to gain traction and are expected to raise fresh capital in the near future. Key drags on the Group are its PN17 status and higher oil prices. There have been no fuel hedging contracts since March 2021.
Source: PublicInvest Research - 1 Mar 2022